`Fiscal deficits indicate continued macro-economic imbalances'

Allahabad: The Comptroller and Auditor General of India has warned that Uttar Pradesh is gradually getting into a debt trap due to continued macro-economic imbalances in the State.

In its report for the year ended March 31, the CAG has given a grim picture of the State's economy, marked by large fiscal and revenue deficits, no return on investments made by the Government and an extremely poor ratio of assets to liabilities.

As per the report, the State's revenue deficit for 2004-05 stood at Rs 6,993 crores, which grew 11.23 per cent from Rs 6,287 crores in 2000-01. Fiscal deficit also increased by 27.71 per cent at Rs. 12,997 crores in 2004-05 as against Rs. 10,177 crores in 2000-01.

It said, "Large revenue and fiscal deficits year after year indicate continued macro-economic imbalances". The report also points out that the Balance of Current Revenue (BCR) continued to be negative during 2004-05, which would "adversely affect the State's plan size and reduce availability of funds for additional infrastructural support and other revenue generating investment''.

CAG has also expressed concern over the fact that returns on investment of Rs. 9535.57 crores by the State Government in statutory corporations and joint stock companies were nil.

Returns, even in the previous four years, have been less than one per cent, it said.

Low returns on investments indicate "an implicit subsidy and use of high cost borrowing for investments, which yields very little to it", the CAG report said.

CAG has also expressed displeasure over the sharp rise in the State's fiscal liabilities during the last five years.

The overall fiscal liabilities of U.P. increased from Rs. 80331 crores in 2000-01 to Rs. 131401 crores in 2004-05. These liabilities as ratio to gross State Domestic Product rose from 44.1 per cent in 2000-01 to 55.8 per cent in 2004-05.

Ratio of financial assets to liabilities was lowest at 0.45 in 2004-05. A greater part of liabilities is, therefore, without any asset back-up, the report added.

"This indicates that either the state has to generate more revenue out of its existing assets or needs to provide from its current revenues for surviving its debt obligations," it said.

State's revenue receipts registered an increase of 18.90 per cent between 2000-01 (Rs. 24743 crores) and 2004-05 (Rs. 37617 crores).

While on an average, only 49 per cent of the revenue had come from the State's own resources, Central tax transfers and grants-in-aid together contributed the remaining 51 per cent. The relatively lower contribution of non-tax revenue to overall revenue receipts is due to poor recovery of the cost of social and economic services provided by the State, CAG said in its report.

The total expenditure of the State increased from Rs 35216 crores in 2000-01 to Rs 50892 crores in 2004-05, while revenue expenditure was 88 per cent of the total expenditure.